Pacing out growth to deliver fiscal sustainability, boost efficiency: The government will strategically slow the execution of some of its economic transformation projects, seeing some conclude past their initial 2030 deadlines, Finance Minister Mohamed Al Jadaan said at the annual budget forum on Thursday (watch,runtime: 37:10). “Certain projects can be expanded for three years — so it’s 2033 — some will be expanded to 2035, some will be expanded even beyond that and some will be rationalized,” Al Jadaan explained.

SOUND SMART- Growing while managing inflation + import bill: The rapid execution of Vision 2030 mega projects, aimed at strengthening and diversifying the non-oil economy at home, shouldn’t come at the expense of spiraling inflation, the minister suggested. Focusing on delivery “in a short span of time” fuels inflation and encourages more imports to cover the resources that the economy can’t currently provide, Al Jadaan said.

Not pulling the plug, just recharging: More time is needed to “build factories, build sufficient human resources,” said Al Jadaan, suggesting that the government will need to ramp up investment and double-down on building capacity before it breaks ground on some of the planned projects.

What we don’t know: While the minister didn’t specify which industries and projects will be pushed back, he mentioned they are “largely projects in the pipeline which have not been announced yet — are given a longer executional timeframe.” The Economy and Planning Ministry is currently reviewing the priority list to decide which projects will see their timelines stretched, according to Al Jadaan.

SOUND SMART- Officials don’t want government borrowing to soak up liquidity the private sector needs to grow.Access to debt for both private companies and citizens is key to growth, Al Jadaan suggested, noting that the government has no interest in crowding them out. Policymakers have also considered the delay in terms of how much international debt the Kingdom wants to take on, emphasizing the need to stay below a sustainable debt ceiling measured against both GDP and non-oil GDP, the minister added.

Running on a deficit to fund growth: “We intentionally decided to spend more and cause the deficit. If you spend that money right, on productive assets, then it’s money well spent,” Al Jaadan said in a live FY 2024 budget broadcast on Wednesday. Al Jadaan revealed a targeted deficit of SAR 79 bn (1.9% of GDP) in the next fiscal year — and is signaling it will continue to run deficits to support the “government's strategic expansionary spending.”

REAX- A calculated move: Extending the timeline for some projects that were initially planned for execution by 2030 is a calculated move by Crown Prince and Prime Minister Mohammed bin Salman who is “open to advice from other parts of the system,” Bloomberg reports, quoting Ayham Kamel, head of Middle East and North Africa research at the Eurasia Group.

One pundit cheered the move in light of lower oil receipts: “It’s fiscally positive, especially against the background of relatively lower current oil income. There are also inevitable logistical bottlenecks that were bound to delay some projects,” the business information service quotes Steffen Hertog, an associate professor at the London School of Economics, as saying.

Tags: